Overview:
A bill designed to lower construction bonding requirements for Palauan-owned companies has stalled in the Senate, not over contractor relief — but over a controversial shipping registry rider added by the House. Lawmakers deferred a final vote as questions mount over procurement authority, transparency and executive power.
By: Eoghan Olkeriil Ngirudelsang
KOROR, Palau — A bill intended to ease construction bonding requirements for Palauan-owned companies bidding on government projects has been deferred in the Senate, after lawmakers raised concerns over an unrelated shipping registry provision added by the House of Delegates.
Senate Bill 12-22, which reached its third and final reading last week, was postponed to a future session day as senators continued debating whether the House’s policy rider should remain attached to the measure. While there was broad support for the bill’s original goal of helping local contractors compete for public works projects, several senators said the shipping registry language raised serious policy and procurement questions.
The bill was introduced by Sen. Brian Melairei and other senators to address what lawmakers have described as a longstanding barrier facing small, locally owned construction firms: high bonding requirements that often make it difficult for them to bid on government contracts.
Under current law, contractors must secure performance and payment bonds for projects exceeding $100,000. Senate Bill 12-22 initially proposed automatically waiving those bond requirements for wholly Palauan-owned businesses bidding on projects valued at $250,000 or less. For contracts between $250,000 and $500,000, procurement officers would have discretion to either waive bonding entirely or reduce it by up to 50%.
After passing the Senate, the House of Delegates amended the bill, further expanding the bonding relief for Palauan-owned contractors. The House version raises the automatic bonding exemption threshold to $300,000 for fully Palauan-owned firms. Contracts valued at or below that amount would not require performance or payment bonds, a change delegates said would remove key hurdles for small local businesses.
The $100,000 bonding threshold for non-Palauan-owned companies would remain unchanged.
For projects valued between $300,001 and $600,000, the House amendments allow procurement officers to waive bonding entirely for Palauan-owned firms or reduce bonding requirements for others, provided the decision increases competition and serves the government’s interests. Any such waiver or reduction would require a written risk assessment.
For contracts exceeding $600,000, bonds could be reduced but not eliminated, with a minimum requirement set at 50% of the contract value.
However, the House also added a rider dealing with the Palau Open Ship Registry, a move that ultimately stalled the bill in the Senate.
The rider would grant the president authority, with approval, to allow the minister to appoint a ship registry administrator or special agent. It would also permit the president to delegate responsibility for registry-related fees — including international membership fees — to that administrator or agent.
Additionally, the rider authorizes the president to enter into a six-month contract to operate the Palau Open Ship Registry in the event of a contractual lapse. Such a contract would be exempt from procurement laws, with any subsequent contracts required to follow standard procurement procedures.
During Senate debate, Sen. Eldebechel explained that the shipping registry was established under legislation passed by the 8th Olbiil Era Kelulau, creating the Palau International Shipping Registry as a joint operation between the government and private partners. Revenue is generated through fees paid by vessels flying the Palau flag.
Eldebechel said Congress received a letter from President Surangel Whipps Jr. about three months ago stating that businesses associated with the registry’s private partners had been sanctioned by the U.S. government, leading to frozen assets and revenues. As a result, Whipps ordered termination of the contract, Eldebechel said, arguing that the rider would allow the president to quickly secure a replacement operator and avoid revenue losses.
Several senators objected, saying they supported the construction bonding reforms but not the shipping registry provision.
Sen. Melairei questioned why existing procurement mechanisms could not be used, noting that the Bureau of Transportation had indicated it could temporarily manage registry operations with minimal resources while a procurement process is underway.
Sen. Andrew Tabelual criticized the timing, saying lawmakers had not received documentation or updates in the months since the issue was first raised. He said Congress still had not been provided a copy of the termination notice.
Senators deferred the bill, leaving Senate Bill 12-22 pending as deliberations continue over whether the shipping registry rider should remain attached to legislation aimed at supporting Palauan-owned construction companies.